When a Partner Makes an Advance or Loan to the Partnership

question 12

Multiple Choice

When a partner makes an advance or loan to the partnership, how many of these statements are true?
He/she is entitled to interest at the rate of 7% p.a. unless there is an agreement to the contrary.
The amount loaned is added to the partners equity account balance.
Interest on the loan is regarded as an expense of the partnership and appears in the income statement.

• A) 0
• B) 1
• C) 2
• D) 3

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Definitions:

Scooter Assembly

The process of putting together the various components of a scooter to make it ready for sale or use.

Assembly Worker

An individual employed to construct various components into a final product in a manufacturing process.

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A measure of how frequently a company uses and replenishes its stock of raw materials within a specific period.

Raw Materials Used

Refers to the basic substances in their natural, modified, or semi-processed state used in manufacturing or production.